Correlation Between ABC Taiwan and EirGenix
Can any of the company-specific risk be diversified away by investing in both ABC Taiwan and EirGenix at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ABC Taiwan and EirGenix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABC Taiwan Electronics and EirGenix, you can compare the effects of market volatilities on ABC Taiwan and EirGenix and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ABC Taiwan with a short position of EirGenix. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABC Taiwan and EirGenix.
Diversification Opportunities for ABC Taiwan and EirGenix
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ABC and EirGenix is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ABC Taiwan Electronics and EirGenix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EirGenix and ABC Taiwan is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ABC Taiwan Electronics are associated (or correlated) with EirGenix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EirGenix has no effect on the direction of ABC Taiwan i.e., ABC Taiwan and EirGenix go up and down completely randomly.
Pair Corralation between ABC Taiwan and EirGenix
Assuming the 90 days trading horizon ABC Taiwan Electronics is expected to generate 0.85 times more return on investment than EirGenix. However, ABC Taiwan Electronics is 1.18 times less risky than EirGenix. It trades about 0.0 of its potential returns per unit of risk. EirGenix is currently generating about -0.04 per unit of risk. If you would invest 2,550 in ABC Taiwan Electronics on August 30, 2024 and sell it today you would lose (270.00) from holding ABC Taiwan Electronics or give up 10.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABC Taiwan Electronics vs. EirGenix
Performance |
| Timeline |
| ABC Taiwan Electronics |
| EirGenix |
ABC Taiwan and EirGenix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABC Taiwan and EirGenix
The main advantage of trading using opposite ABC Taiwan and EirGenix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABC Taiwan position performs unexpectedly, EirGenix can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in EirGenix will offset losses from the drop in EirGenix's long position.| ABC Taiwan vs. Hon Hai Precision | ABC Taiwan vs. Delta Electronics | ABC Taiwan vs. LARGAN Precision Co | ABC Taiwan vs. E Ink Holdings |
| EirGenix vs. Elan Microelectronics Corp | EirGenix vs. Oceanic Beverages Co | EirGenix vs. Ambassador Hotel | EirGenix vs. Chung Lien Transportation |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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